The Morning Call
1/21/20
The
Market
Technical
The good news is that absolutely nothing has changed
in the S&P chart in the last four weeks.
The index continues to smoke to the upside, remaining above the MA’s and
in uptrends across all timeframes. There
is little technical evidence that this will change in the near future.
The long bond hasn’t altered its trading pattern. After falling back from the upper boundary of
its intermediate term uptrend, it went on to revert its 100 DMA from support to
resistance and reset its very short uptrend to a trading range.
The whackage in the dollar continued. Both MA’s have reverted to resistance and its
short term trend has reset to down.
Gold made a nice recovery over the last month,
now trading above both MA’s and in short term and very short term uptrends.
As you might expect in a strong up Market, the
VIX hovers around all-time lows and gives no sign that sentiment could be
turning negative.
Bottom line: the S&P, TLT and
VIX are all suggesting that the economy and prospects for better earnings growth
are improving. However, the dollar
should be acting better and GLD worse under such a scenario; so, they represent
cautionary signals.
Fundamental
Headlines
During the week of
12/16, the US numbers were neutral while the overseas stats were positive; the
week of 12/23, the US data was positive, the overseas numbers were negative;
the week of 12/30, the US and overseas stats were negative; however, the weeks
of 1/6 and 1/13 were both quite positive not only for the US but also across
all the major global economies. Score: in the last 223 weeks, seventy-three
were positive, one hundred and one negative and fifty neutral.
In sum, the US
numbers continue to portray the economy as sluggish. However, the marked improvement in the
economic stats in the last two weeks helps feed the notion that the US can
avoid a recession---though I would by no means conclude that some kind of ‘lift
off’ is occurring. Much more is needed
for that.
For
the economic optimists---don’t worry about debt. One question, what about all that mortgage
debt in 2008 and what about that leverage in hedge funds today?
Counterpoint.
For the true Fed
believers.
Rounding
out this day of optimism, John Mauldin actually pinned an upbeat long term outlook.
But
there is always that nagging problem of valuations.
And
the Fed. (must read)
Jeff
Gundlach’s latest take on Fed policy.
Bottom
line: as long as investors buy into the notion that the Fed will forever have
the Market’s back, stock prices are likely to go higher. However, sooner or later, expansive monetary
policy that only benefits equities versus the real economy will push valuations
to such extremes that an ‘emperor’s new clothes’ moment seems inevitable. May not happen for a year, two years. But when it does, cash reserves will look
awfully good. Enjoy the ride; but
consider taking some profits in your big winners.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
International
October
UK payrolls grew faster than anticipated while November average earnings were
up 3.2% versus forecasts of up 3.1%.
November
Japanese industrial production fell 1.0% versus estimates of -0.9%.
December
German PPI came in at 0.1% versus expectations of +0.2%.
January
EU economic sentiment came in at 26.7 versus consensus of 15.0.
Other
IMF
cuts global economic outlook, again.
Baltic
Dry index continues to decline.
Update
on Brexit.
The
latest on the oil market.
What
I am reading today
The
survival function of Roman emperors.
The ethics of your financial
affairs.
The math of debt.
Update on bitcoin.
Quote of the day.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
